GASB establishes new GAAP hierarchy for governmental accounting

New accounting guidance issued Monday by GASB reduces from four to two the categories of authoritative GAAP in the GAAP hierarchy for state and local governments.

Under GASB Statement No. 76, The Hierarchy of Generally Accepted Accounting Principles for State and Local Governments, the first category of GAAP consists of GASB statements of governmental accounting standards.

The second category of GAAP comprises GASB technical bulletins and implementation guides, as well as guidance from the AICPA that is cleared by GASB.

“Applying accounting standards can sometimes be complex, but identifying the right standards to apply should be straightforward,” GASB Chairman David Vaudt said in a news release. “Statement 76 goes a long way toward making that a reality.”

The new standard also addresses the use of authoritative and nonauthoritative literature for situations when GAAP does not specify the accounting treatment for a transaction or other event.

The new guidance was developed to help governments apply GAAP with less variation, improving the usefulness and comparability of financial statements. Statement No. 76 also elevates the authoritative status of implementation guidance to a level that requires it to be exposed for public comment before it is issued.

GASB also recently cleared Implementation Guide No. 2015-1, which incorporates changes resulting from feedback received during the public exposure of all of the implementation guidance issued previously.

The requirements take effect for reporting periods beginning after June 15, 2015.

—Ken Tysiac (ktysiac@aicpa.org) is a JofA editorial director.